Tacking

This post is obviously oversimplistic. Many of the idiocies I present here are, intentionally. All blog posts are wrong but I hope some are useful. This one is more of a thumbnail than usual, but I hope it is still useful.


One way to understand the United States’ political arrangement is that it has functioned to enable a kind of tacking. Tacking is a sailing maneuver that allows a seaman, by zig-zagging, to perform the daunting task of bringing a wind-driven boat upwind.

In one famous oversimplification, the American electorate tends socially conservative but economically left, while the American elite is socially liberal but “fiscally conservative” (i.e. economically right). Here’s a graph from Lee Drutman (via Karl Smith) of the 2016 electorate:

Although the strongest clusters are at the bottom left and center north, there are plenty of Americans in the category Paul Krugman described as “hardhats” (and, a bit ironically in retrospect, as missing from the political scene): socially conservative but economically left. Further, if you averaged the American electorate in the way that a voting system or political consultant might, if you collapsed it to a single point, it would sit in that quadrant — clearly to the economic left, socially center-ish but tilting conservative. “The United States is a center-right country” is a common oversimplification that is not only wrong but mostly useless. “Left but not woke” (which David Frum dubbed Bernie Sanders’ brand) is a better characterization of the heart of the US electorate, or at least it was as of 2016, before “The Great Awokening“.

Yet neither US political party’s messaging has historically been tailored to the top left quadrant in which the average (but not modal) American has lived. We have one party that bills itself as full-throatedly socially liberal and half-heartedly economically left, and another party that bills itself as full-throatedly on the economic right, but half heartedly socially conservative.

Donald Trump rose to power by taking this missing ground. He campaigned (although has not governed) from the economic left, talking about universal health care, protecting entitlements, and trillion-dollar infrastructure projects, and from a social right so unapologetic some of his copartisans denounced it as racist. It worked! Under the simple (very wrong) median-voter-theorem-ish logic under which the US political system is supposed to deliver moderation, both US parties should be messaging somewhere just north and substantially left of the center point of this graph. But that is not where either US party usually is.

However, if you factor in the shared preferences of elites who shape both parties’ political operations — professionals and donors — maybe the arrangement makes a bit more sense. If these players are not neutral operators trying to gain votes for their team, but interested actors whose bipartisan target sits (lonesomely!) in the bottom right of the graph, then you can see some sense in the parties’ positioning. The United States historically oscillates between its political parties. Elites can make economic progress when Republicans govern, by deemphasizing the social issues that win the votes and enacting the less popular economic agenda. When Democrats are in power, elites make pursue their agenda by emphasizing social progress while disingenuously lamenting constraints that thwart economic progress. Elites use our famous “peaceful transfers of power” not as signals to change direction, but as the zigs and zags that constitute a tack in their prescribed direction.

This is more an account of the past than a guide to the future. Hopefully it helps discredit the (silly) “too much democracy” theory prominent among elites to explain current political dysfunction. The electorate has spent decades swapping political parties and moving away from what, on average, it has wanted. The social extremity of the Trump coalition can be understood less as a discontinuity, and more as part of a reaction to the post-2008 discrediting of elite economic preferences. Emphasizing polarization on social rather than economic grounds helped avoid a dangerously “left but not woke” primary challenger among D-leaning voters (who live mostly in the left half of the graph), and also helped mobilize a dispirited, economically not-so-conservative base to turn out in an expression of social resentments among R-leaning voters (who live mostly in the top half of the graph). Both parties’ elites shared an interest in polarizing the countries across a social and cultural terrain, while de-emphasizing economics. But Trump turned Washington’s gurus into sorcerers’ apprentices, as their usually calibrated tweaking of social resentments gave way to a figure they increasingly cannot control, and of whose governance no sane American should approve.

In 2020, I am a bitterly disappointed either-Bernie-or-Liz guy. Nevertheless, I’ll be working to elect Joe Biden over Donald Trump this fall. But I do hope a new administration understands the stakes. You can’t not give the public what it wants over a period of decades and expect democratic forms and norms to go unscathed. In order to bring down the temperature of social polarization in the United States (which, perhaps marking me as a squish sell-out, I desperately hope we manage), elites will have to reverse their 2016 mistake, and give ground to the left on economics while trying to talk the country down (“unify”) from the social polarization that they themselves, in my view, quite cynically engendered.

Neoliberal desegregation

On bunch of housing-related issues, the United States is badly paralyzed. In aggregate, “we” would like things to change. We would like our housing (and with it access to public goods like high quality schools) to be less stratified by race and class. Many of us (although perhaps fewer mid-pandemic) think that on environmental, social, and economic grounds, we’d be better off if we built and lived more densely, sunsetting postwar US suburban sprawl for something more like the megacities of East Asia.

The pro-density agenda is controversial. But at least in theory, the desegregation agenda is not. Even in this moment, with its boogaloo warriors and the Fox-News-o-sphere shouting from a reactionary crouch as protests rage over racial injustice, pretty much no one in the United States overtly favors residential segregation. Yet almost all white Americans — not just hateful bigots on the right, but liberals, lefties, wishy-washy social democrats — tacitly engage in practices that reinforce that segregation. Bourgeois liberals apologize for the practice, we are not unaware, but once we have kids, we insist they grow up in “nice” neighborhoods with “good” schools, knowing and quietly exploiting correlations between both race and affluence and our scare-quoted notions of quality. One way people try to address this is to encourage (or shame) families into not insisting upon access to segregated public goods, or at least not relying on the correlations embedded in segregation to make their choices. I don’t think this is likely to be fruitful. Structural racism requires structural remedies. To use a much-too-dry, economist-ish analogy, families with the option of purchasing segregation as a visible proxy for high quality public goods are in a situation very much like a depositor in a (pre-FDIC) bank she believes to be sound, but that is facing an incipient run. She might be right about the fundamentals, but a bank run will destroy even a solvent bank. Participating in the run, withdrawing her funds, is antisocial. But failing to participate (by withdrawing early, while she still can) will cost her life’s savings, and won’t save the bank. The individual incentives to behave antisocially are too strong for it to be credible that everyone will spontaneously agree to do the right thing. And if (nearly) everybody will not do the right thing, doing it on your own yields little social benefit and a lot of self harm.

Obviously, the analogy here is not perfect. Our bourgeois liberal’s child may derive real benefits, not just costs, from being educated in a racially and economically diverse setting. (The most affluent families purchase slots in private schools that bus in a carefully selected, “safe”, diversity.) A bank either goes bust or not, but when a well-resourced family does choose to place their child in a less affluent, less lily white, school, there may be incremental benefits to other children and families. If so, each family’s individual choice to acquiesce to segregation as a proxy for public goods imposes an opportunity cost on kids and families who cannot make that same choice. On moral grounds, the case for condemning parents who seek predominantly white and asian neighborhoods as a proxy for safety and good schools is undoubtedly stronger than the case for condemning a person who gets out early during a bank collapse. But given just how starkly public goods like safety and educational outcomes are in fact segregated in our society, and given parents’ unusual solicitude for the welfare of their own children over other moral goods, I don’t think trying to remedy segregation by encouraging or shaming people one-by-one will do a lot of good.

We’ve tried some more structural approaches, most notably bussing and school assignment lotteries, both of which try to decouple residential segregation patterns from school quality. These approaches have not proved sustainable. For traditional beneficiaries of segregated public schools, these practices impose two kinds of costs. Their kids have to bear the cost policymakers intend to impose — sharing more broadly the public schools, and so bearing more of the costs and risks associated with the education of less privileged populations of students. But they also impose deadweight costs, like long bus routes and the quotidian challenges of pick-up and drop-off when home, school, and work may all be in entirely different neighborhoods. These deadweight costs create beautiful personal and political pretexts for rolling back the policies without feeling evil. Of course we support equal opportunity and desegregated schools. It just doesn’t make sense, though, that my kid should have to go to a school halfway across the city, when the school just a block from our home is much better! To sustainably remedy the segregation of public goods like education and public safety, I don’t think anything other than remedying the geographical and social segregation of humans will suffice.

Here I propose a very neoliberal approach to that. Affluent and especially white Americans segregate themselves because it is in their and their families perceived interest to do so. Individually, we face incentives to continue a centuries-old, self-reinforcing dynamic. But one thing neoliberal social engineering is very good at is flipping incentives. What if we literally paid people to integrate their neighborhoods, or taxed people who insist upon, or fail to remedy, segregation? We already have a property tax system. Suppose that for each point of residential geography, we computed the overall demographics within a circle extending for, say, 50 miles. Then we compute a metric summarizing the divergence between the demographics of the (very) immediate neighborhood and the overall regional demography. We provide a property tax refund in an amount that decreases with demographic divergence. Property taxes would become much lower in neighborhoods that are well integrated. Neighborhoods that are segregated would face higher property taxes. All of a sudden, the segregated themselves would face significant financial incentives to figure out how to integrate their own neighborhoods. In effect, we as a polity would be trying to purchase integration with tax credits paid directly to homeowners.

If you take the ugly patterns of contemporary America to be eternal and immutable, you might argue that this wouldn’t work. The public goods that affluent, especially white, Americans associate with segregation are extraordinarily valuable, so rich people would just pay up to keep the status quo unless the tax benefit for integration was implausibly large. I think this misses two important points. First, “affluent” America is not uniformly that comfortable or affluent. In most “nice places”, substantial fractions of residents have leveraged themselves to the hilt to buy their smallish-for-the-neighborhood home in that great school’s catchment area. Affluent America is now full of $1M plus homes. At current-ish tax rates, without going refundable, a full property tax credit could amount to more than $10K in savings every year, a pretty big deal for many people who struggle to afford “nice”. If we wanted to keep the scheme revenue neutral, we’d increase the base property tax rate to cover the cost of the integration credits, widening further the range of credits that could be offered. (And nothing prevents making the tax credits refundable, effectively offering a negative property tax for the best integrated neighborhoods.) There’s a real incentive here.

And for most of these people, I think there is not a real trade-off they would pay up for. Perhaps my glasses are rose-colored, but I think most families who participate in the dynamic that sustains and reinforces existing segregation understand the unfortunately accurate correlation between neighborhood demographics and public goods quality, but do not mistake those correlations for causality. That is they understand that, for bitter historical reasons, if you want to predict which neighborhoods are likely to be safe and have good schools in the United States, racial demographics are informative. But they do not believe that “whiteness”, for example, causes public goods quality, or that “blackness” diminishes it. Therefore, it should be possible to integrate ones immediate neighborhood without a cost in the quality of neighborhood-based public goods. Whenever a house in the neighborhood goes up for sale, existing residents would have a financial incentive to actively recruit diverse newcomers who they’d welcome as neighbors.

There are obviously things that are problematic about this. This recruitment would be quite similar to the way upscale private schools recruit their diversity. Race might not be causal of local public goods quality, but class plausibly is. The PTAs of “public” schools raise a lot of money from parents for “enrichment”. Students whose families lack social and financial resources sometimes require schools to do extra work to compensate, creating a burden. Affluent white neighborhoods would end up competing for the “nicest” (meaning richest, most bourgeois) black families to integrate themselves with. That’s tokenistic and ugly. But still better than the racially segregated status quo.

And of course, the financial incentives would not apply solely to affluent neighborhoods. In most of the United States, public goods quality is middling to poor regardless of racial demographics, but segregation is sustained by some combination of people’s modestly higher comfort level with their own groups and (hopefully modest) discrimination against outgroups. Direct homeowner financial incentives that favor integration could make a lot of headway in these neighborhoods.

It’s not only households of the segregated majority that could use financial incentives to integrate their neighborhoods. “Pioneer” families moving into previously homogeneous neighborhoods face challenges ranging from culture shock and unintended “microaggressions” to overt racial hostility. Under this proposal, pioneer families would effectively receive financial compensation for helping integrate a neighborhood, relative to purchasing a home of similar value in an own-ethnicity segregated neighborhood. And the proposals would give new families and their neighbors a shared, common, financial interest in making things work out.

Under the status quo, racist behavior by white homeowners is encouraged by a plain economic incentive: So long as affluent Americans use segregation as a proxy for pubic goods quality, any integration of a neighborhood reduces perceived public goods quality, and therefore home values as well. Conventional American homeownership is in financial terms a huge, undiversified, leveraged speculation. Homeownership overshadows all other investment for most families, and is for them the basis upon which any financial security rests. Under these conditions, it is not right, but it is also not surprising, that people with expensive houses prioritize maintaining home values above what should be more important social goods, like not being racist. A reduced property tax burden for integrated neighborhoods could offset this financial incentive. Property tax burdens get impounded into home values too. A property tax advantage for integrated neighborhoods would push home prices upwards, offsetting any price effect of integration on perceived public goods, especially over time as correlations between segregation and public goods quality (hopefully) diminish. Realizing the lower tax burden and higher home values would be a shared project for both new, integrating, families and existing residents of formerly segregated neighborhoods.

I’ve mostly discussed the incentives of homeowners, but if landlords experienced the same integration-dependent property tax schedule, they would also have a financial incentive to integrate their buildings. There are devils in details. Would those incentives lead landlords to violate equal housing laws? Should we modify equal housing law to permit practices that would diminish segregation according to our metric, so that landlords can seek to capture the subsidy, perhaps by sharing it with the pioneer families they’d seek to attract? There’s more to think about here.

Integrating disproportionately white, especially upscale, neighborhoods sounds like a worthy project to liberal American ears, but what about integrating disproportionately black or latino neighborhoods? Would an incentive designed to move every neighborhood towards a region’s average demography increase the threat vulnerable communities already face from displacement and gentrification? We value ethnic enclaves like Chinatowns, both as tourist attractions and living communities. Should we design incentives in a way that excludes these neighborhoods, because they reflect a form of segregation we’d prefer to retain? If so, should the same exclusion apply to Little Italys or traditionally Polish neighborhoods? Maybe it is upscale communities that most urgently, and least problematically, should face pressures to integrate. We could design a tax credit that only offsets property taxes above some threshold, so that poorer communities would not face financial incentives to integrate. Perhaps we’d simultaneously make the property tax progressive, so that owners of lower-value homes share some benefit. One advantage of a neoliberal, technocratic, thought experiment is it forces one to think pretty explicitly about values and tradeoffs, in order to translate them to formulas. (But a key disadvantage of neoliberal, technocratic policy is that often formulas are proposed and enacted while the values and tradeoffs they embody are largely inscrutable to the general public, enabling onerous values to get entrenched into law.)

We could use the same technique to purchase densification, if we as a polity agree that densification is something we want to buy. Right now, existing “homevoters” tend to favor neighborhood preservation over densification. Localities enact thickets of zoning regulations whose effect and purpose is to give neighbors veto power over new development. People like Elizabeth Warren have proposed offering Federal grants conditioned on localities reducing land-use regulation, on the theory this will create an incentive to permit densification. But that is not a great approach. It creates incentives for local officials to game the system in order to meet homevoters’ dueling preferences for more amenities (what Federal grants can buy) and continued restriction of new development. The likely effect would be a shift from status quo land-use restrictions to more tacit practices that still enable neighbors to veto projects but aren’t disqualifications for receiving grants. A cat and mouse game between density proponents and preservationist homeowners would ensue. A much simpler approach would be to define a property tax credit for neighborhood density. This would “flip the incentives” of (some) homevoters, from opposing new development to welcoming it. Local officials could then just do what these voters want. By adjusting the scale of the tax credit, and perhaps setting a threshold beneath which it wouldn’t apply, we could try to target densification towards more upscale communities so that it is less of an engine for displacement and gentrification.

Pandemic diary 2020-06-03: Mad world

I cannot not say that I think it is madness.

I think it is madness that the United States is engaged in a cycle of mass protest and suppression while in the thick of an uncontrolled deadly pandemic. Some of you are fond of imagining what the history books will say, after that subject’s long arc has finally run its course, about this or that policy atrocity. What will the history books say about people crowding into streets to protest or to suppress, people crowding into vans and buses to detain or to be detained, people crowded in holding cells as the detained, while a deadly respiratory virus travels from lung to lung to lung?

This is not to say that I blame the protestors. Predictably enough given my politics, if you ask who I blame I will blame the police. From my vantage, however unavoidably unrepresentative that may be, many police departments have responded even to peaceful (but disruptive) protests with escalation, rather than accommodation and protection. They have tried to suppress the protests rather than work with the great majority of protestors who do not condone looting and vandalism, but who do demand to block roads, to surround buildings, to exact a toll on commerce and convenience but not life and property. I worry, perhaps unfairly, that police have intentionally ignored or even encouraged crimes against property to serve as pretexts for aggression against peaceful protestors.

Maybe you disagree. Great. History will have its verdict there too (although we should never imagine that the verdict of history is God’s truth). But it seems to me we all have a common interest in finding some detente that would get us through the next year or so without crowding into streets and precinct houses.

I think “civil strife” in the US is overdue and unsurprising. In ordinary times, I would be sad and worried, but also hopeful that these convulsions might put us on a better path than the slow social collapse and rising stock market of the last decade. For me, watching it all, it is hard not to feel a chord of elation. Here finally is a new civil rights movement maybe strong enough, maybe serious enough, to actually remedy our national sin and so redeem us all. (Intellectually, there are problems with this theory. But emotionally the pull is strong.)

These are not ordinary times, however. The pandemic is not a plot laid by capitalists and racists to suppress the black, brown, and poor. Two weeks ago it was the capitalists and racists endangering us by pretending the virus was under control or no big deal. It was easy for me and people with my political sympathies to condemn that. Now we are… nuanced. Perhaps reasonably! You can argue (I’d quickly agree) that pursuing the cause of racial justice is a more important good to weigh in the balance against pandemic harms than a pool party, or getting to go to the gym. Less dismissively, you can point out that the miseries of business owners and unemployed people, many of whom have not been made remotely made whole, can be relieved without creating public health hazards by offering more generous public support, but there is no simple switch we can flip to end police violence and racism. Perhaps the social and political good these protests might do outweigh the harms at the margin they do to pandemic control. There’s a case to be made.

But let’s be conscious of the scale of potential harms, of the risks we are collectively taking, with “we” here including the protestors and the police in their codependent dance, people like me and perhaps you on the sidelines, encouraging one group or the other, public figures who could perhaps diffuse the situation, the public as a whole. Maybe the “reopeners” were right after all that the hazards of this pandemic are actually pretty manageable. Maybe the virus simply does not transmit very easily outdoors and in heat, maybe widespread mask-wearing dramatically reduces its infectivity, maybe loads of people can hang out outside, even chanting and shouting, if they do their best to stay masked when they are not chanting or shouting and at least six feet apart. Maybe the number of people getting arrested and dangerously confined is too small to make a dent in the pandemic, however dramatic it all looks on TV.

But maybe not. These are things we just don’t know. Jumping on them is accepting risks most of us thought premature when Georgia and Florida and Texas started “opening” a month ago (now we begin to see a mortality bump). This current cycle of current protest and suppression might prove not so terrible, epidemiologically speaking. Or it might prove really terrible. We don’t know. If it is really terrible, how really terrible would it be?

Astonishingly, miserably, your lifetime risk of getting killed by the police, if you are black and male, is about one in a thousand. That is a fucking crazy death rate, a blot and a stain and an ineradicable shame on our political community. At a moral level, nothing can minimize that or undo the grief and fear that black communities have and continue to live with. Mercifully, COVID-19 does not inflict the same degree of shame and anger upon us as police killings. It is, to a certain degree though not fully, an act of god rather than an act of man. But COVID-19 does inflict grief, fear, and death upon us.

Over just a few months, your risk of dying of COVID as a New York City resident was roughly two out of a thousand. [*] That is twice a black male’s lifetime risk of death-by-cop. That two-per-thousand death rate is lower than the true number for black residents, and especially black male residents, since the disease killed black and male disproportionately. As far as we can tell, maybe 25% of NYC residents were ever infected by the virus. (We think as of mid-April about 20% had been infected, but infections have been subsiding since then.) New York’s epidemic was belatedly suppressed. A resurgent epidemic could bring the death rates of five or six per thousand, and significantly higher for black men, to New York City and everywhere else.

Black lives matter, and the disproportionate dying by black men of COVID-19 is almost certainly caused in great part by the socioeconomic conditions that current protests mean to remedy. But the current protest/suppress/escalate cycle in the streets risks a whole lot of lives, black lives and other lives. It risks death at a scale of many years of police killings. Obviously, the cause of addressing racist police violence cannot be put on pause. But is there any way we can shift towards less risky means of pursuing it?

Even as a matter of politics, the pandemic tilts towards finding other means of pursuing justice. Always with disruptive protest, movements have to balance the effectiveness of visibility and pressure against the possibility of backlash and retrenchment. Often “risk of backlash” is wielded disingenuously, a classic rhetoric-of-reaction perversity claim. You, dear reader, will have to decide whether this essay falls into that category. In ordinary times, my views on this stuff are nuanced.

But consider the following scenario: A few weeks from now, while protests are ongoing, cases and then mortality really spike. For now, the public-at-large seems remarkably supportive of the protest movement. But if conventional wisdom comes to blame it for a reinvigorated epidemic and all the miseries that attend it, if the public (black and not) can be persuaded that “burn it all down” rhetoric translated into a wildfire of indiscriminate disease, the public sympathy that political progress requires may curdle into hard hostility. A nation convinced that a “hard left” or “black activists” hate America so much they recklessly or intentionally caused hundreds of thousands of avoidable deaths will not be fertile ground for justice or social democracy.

I am not saying that people should stand down now. Acts of violent suppression make it untenable for protesters to stand down. I am saying that the costs and risks of this form of political struggle, at this time, are dizzyingly higher than they usually are due to the pandemic (and even in usual times, the stakes are very high). I am pleading that all sides take into account the very real risk of mass death that attends the path that we are currently on, and find ways to deescalate from epidemiologically dangerous tactics without betraying causes and values that are inviolable.

I don’t know exactly what this might look like. Obviously I can’t speak for people in the street, or behind riot shields, or in the White House. But to be constructive, I’ll hope first that police revert to a strategy of accommodate, protect, and deescalate, that they strive to minimize arrest and detention (which we know are conducive to disease spread), that they enforce the law when people are engaging in actual violence but tolerate a broad range of civil disobedience that does not cause imminent harm. I’ll hope that the movements on the street coalesce around some set of very concrete demands that won’t be sufficient to remedy centuries of white supremacy, but that will address their most urgent concerns and allow them to declare this battle won. I’ll hope with Pat Robertson (really?) that public officials at all levels adopt a tone of conciliation and openness rather than militarization and threat. I’ll hope.


[*] I am using the raw NYC health department numbers, restricting to “confirmed” cases, using 8.4M as the population of NYC. I’ve seen reports of a five per thousand NYC population mortality rate, but I don’t understand how that is computed.

Update History:

  • 6-June-2020, 7:35 p.m. EDT: “…roughly two out of a thousand risk death by cop.” Thank you commenter Brian Slesinsky

Pandemic diary 2020-05-25: Two big questions

My broad take on the pandemic has been and remains pretty grim. Early on, I thought that after decades of prioritizing efficiency over resilience in our supply chains, the pandemic could lead to outright collapse. Gratefully, I think that less likely now, although the possibility is not off the table. It feels like we are in the middle of this thing, but by the numbers we are still in the beginning. According to serological tests in Spain, which has endured much worse mortality than the US, only 5% of the public has been exposed and should be expected to have some degree of immunity. If we take the infection fatality rate to be 0.7% (see a range of estimates here) and if we imagine — very optimistically — that only half the US population becomes infected before “herd immunity” sets in, then we should expect a toll of more than a million dead should we fail to suppress the epidemic.

So far we are “only” one hundred thousand tragedies in. Just the beginning. This is the thinking that places me squarely in the camp of coronavirus hard-liners. I think that we as a society should place a very high priority on infection suppression. For now that means people should either be at home, outdoors and socially distant, or carefully protected when performing essential work. (Whether that “should” needs to be legally enforced is a different question, which I’ll put aside for now.) We should reduce the burden of restricted lives with generous financial and social support. But we absolutely should not encourage people to return to restaurants, bars, theaters, malls, theme parks, gyms, or salons until we are capable of suppressing outbreaks (à la Korea, test/trace/isolate), or until we develop a vaccine or effective treatment.

Is my view wrong, harmful and overdone? One of the poles of our heartbreakingly polarized political system says it is. Restaurants, salons, and gyms are all open here in Florida, where my family is isolating. (Long story.) The benefits that a functioning service economy provides to customers, workers, and business owners are very real. The question is, can “reopening” be done safely? If it can be, to the degree we can reopen without accelerating infection, of course we should. But we should not undertake any reopening that would place us back on a path of exponentially increasing infection. So we come to the key uncertainty: How dangerous is reopening? Right now the US infection rate seems stable, even gently declining. But are we suspended by a delicate thread thousands of feet above a rocky canyon? Or are we held by a firm cable just a few feet above grassy earth? I don’t think we know. A month since states began to reopen, we don’t see much evidence of accelerating infection. Internationally, there has also been some loosening of restraints, without obvious remissions. Sweden, which has been among the least cautious developed countries both in terms of legal restraint and actual behavior, is seeing its (once very high) mortality rate decline despite remaining far from estimated herd immunity. Outbreaks in the developing world, thank god, have not so far been as severe as we might have expected, at least as we can imperfectly observe them. On the other hand, benign outcomes may be the result of continuing caution by the general public. Nowhere are service economies thriving. “Reopenings” are happening mainly in low prevalence places, drawing customers from currently low prevalence populations. But prevalence can change. As we continue to loosen restrictions (legal restrictions, or just restrictions on our own behavior), sparks that have so far died out may suddenly ignite. Some of our sort-of success may be attributable to factors like seasonality and mask-wearing, but both of those are in different ways temporary.

There are I think two potential explanations of benign outcomes that would really change how we understand the pandemic. But I don’t think we know if either of these explanations are true, which turns them into very big open questions.

Explanation I: The spread of COVID-19 is overwhelmingly driven by “superspreaders”, and superspreading is determined much more by behavior and circumstance than by the biology of the superspreader.

If it is the case that the vast majority of infecteds don’t spread at all, while the average number infected (R0) of roughly three is due to a few superspreaders that compensate for the nonspreaders, then preventing infection by these superspreaders could be sufficient to suppress the epidemic. If superspreading is mostly an invisible biological phenomenon, if some recently infected people just shed a whole lot more virus than others, this fact doesn’t help us much with “reopening”. Most of the time most restaurants will operate safely, but occasionally a superspreader will walk in, and unbeknownst to her or anyone else, infect half the room. However, if superspreading is less about biology and more about behavior and circumstance, then we can simply limit the activities during which superspreading occurs. We know indoor choir practice is probably an activity that risks spreading the virus, so we don’t do that. Superspreading seems associated with congregate living arrangements (prisons and god help us nursing homes), loud crowded workplaces (meatpackers), crowded indoor social gatherings, etc. We know that we need to protect or reorganize congregate living places and crowded workplaces — although disgracefully, we seem instead to be opting for a “herd immunity strategy within many of these settings. Following Japan, we could encourage people to avoid the “Three Cs”. We’d keep places like nightclubs and sporting events closed, open up but limit crowding elsewhere.

But this only works if less close, less crowded interactions really are safe. Definitively resolving this is a strong case for aggressively pursuing contact tracing by human interviewers. If infection is a matter of avoidable circumstance rather than an ineluctable result of prior infections (as it might be in simple models of “open”), then actually learning the details of the circumstances under which people became infected is our surest path to freedom. Are indoor restaurants mostly okay? How should we arrange the air conditioning? In our dismal, ridiculous, politics, contact tracing has become associated with Democrats who (like me) want to see the US pursue a South-Korea-style strategy and criticize the President for our botched test-and-trace ramp up. Contact tracing is therefore dismissed by Republicans, who argue that Korea-style containment is unworkable in the United States, so what’s the point? But Republicans eager to reopen should be especially devoted to contact tracing. Reopenings that prove catastrophic to public health will not help anyone, economically or electorally. Contact tracing with detailed interviews is how we learn to reopen safely, if it can be done.

Explanation II: Immunity not reflected by serology

Until a few weeks ago, a big open question was whether the coronavirus was spreading much faster than the disease we actually observed. This, oddly, was more a hope than a concern. If mild infection was in fact much more widespread than we knew, then infection fatality and severity rates — the fractions of people infected who die or experience severe illness — would be much lower than we thought. For individuals, it would mean the disease is less dangerous. In aggregate, it would “lower the ceiling” on mortality. (In the bad case where the epidemic runs its course, a lower infection fatality rates means a lower total casualty count.) We thought that serological studies would answer this question of unobserved spread, and probably they have. Using Spain as an example again, we’ve learned that for every infection we formally detect, roughly 9 people other people who were never diagnosed show antibodies. That may sound like a lot, but it was only enough to bring the infection fatality rate down to about 1%, which still would mean more than a million US deaths without suppression. Undetected cases would have had to be closer to two orders of magnitude more common than detected cases, rather than just one order of magnitude, to keep the death toll in the ballpark of a few bad flu seasons. According to the serological data we have so far, I think this hope is thoroughly dashed. Studies that suggested much more widespread infection, like the Stanford Santa Clara County study, have not proved persuasive.

A last ray of hope lies in the possibility that people who undergo very mild infections do not end up with reliably detectable levels (“titers”) of antibodies in their blood, but still end up with “memory” cells in their immune system that would let them ramp up production of antibodies and specialized T-cells quickly if they were re-exposed to the virus. In other words, there may be people who have a degree of immunity that is invisible to our antibody tests, so that despite our serological disappointments, the true infection fatality rate is lower than we estimate. This is pure hope: There is no evidence that I know of for this idea, beyond circumstantial handwaving about ceilings in the levels of mortality per population we’ve observed so far, which more likely reflects a successful behavioral response than a speculative immunological one. This unobserved immunity hypothesis stands on the less persuasive side of a war between parsimony and hope. Nevertheless, I’m willing to hope.

But I think it’s the wrong call to bet people’s lives on this kind of hope until we have some evidence for it.

Pandemic diary 2020-05-05: Segregation cannot set you free

A few days ago, David Frum offered this extraordinary conjecture:

I don’t think the President and people like Governor Kemp are consciously planning this, but they’re removing all the alternatives to the only policy that is going to remain this time six weeks from now or eight weeks from now. Which is they’re moving toward the policy of what’s — “let’s take the punch.” He’ll reopen and see what happens. Let’s accept that there may be hundreds of thousands, or some double hundreds of thousands, of Americans killed. They’re going to be mostly poor and minorities, mostly not going to be Trump voters. Let’s take that punch and push through and try to get to herd immunity as fast as possible.

I don’t think the President quite processes it quite that rationally, but maybe Governor Kemp does. I suspect Governor DeSantis probably does. But that’s where with they’re going.

There’s lots to say about this. In the short-term, the strategy Frum describes is self-defeating. If affluent people don’t emerge from isolation, “reopening” won’t do much to revive the (dollar-weighted) service economy. We’ll still be saddled with the same ugly economy, but with a higher prevalence of the disease, rendering it even harder to sustain the supply chains of essential goods even Trump’s base relies upon. If the red-state affluent do emerge, the “punch” will be taken in significant part by Republicans’ base after all, and they may not like it.

But also, there’s an error in this thinking that transcends the heavily memed frontier between red and blue. It afflicts affluent Americans broadly. It’s hidden in that phrase “herd immunity”.

We have all heard that “herd immunity” may set in once, say, 60-70% of the population have been exposed to the virus and so (hopefully) immunized. The logic is simple: If R0 is 3, then once two-thirds of the public have been infected, two of the three people a new case would have infected will now be immune. So they’ll infect only one to take their place as they recover, stabilizing rather than increasing the infected population. Once more than two-thirds are immune, on average they’ll infect less than one person, causing the infected population to decrease over time rather than stabilize. Cool.

Affluent Americans of all stripes I think are quietly mulling something like this: It’s a terrible time, and tremendous death and suffering may be inevitable. For all kinds of reasons, we as a country may not be able to “crush the curve” and adopt South-Korea-style social distancing. Maybe it’s just impossible, given the extent the disease has spread and Americans’ general unruliness. Maybe it’s not worth the cost, in dollars and liberty, of living several years in a kind of quiet stage-managed by public health bureaucrats. So maybe acquiescing to “herd immunity” before a vaccine will have to be the way forward. We could get lucky! Maybe asymptomatic spread is much more than experts estimate, so the infection fatality rate is low. Maybe much of the population is immune already, genetically or due to cross-reactive antibodies from common-cold coronaviruses. But we have to be prepared for not getting lucky, in which case more than 200M Americans would become infected, and (under current estimates of an infection fatality rate of ~0.7%) more than 1.4M would die.

But even in that case, some significant fraction the country — say 25% to 33% — need never become exposed, need never risk this game of Russian Roulette where even “winning” may involve suffering and disability. If my family can isolate, comfortably and so diligently, if we can place in the top 25% of isolation diligence, then we can hold out until enough other people have risked and suffered and died that we can emerge safely. If, sadly, herd immunity before a vaccine is inevitable, then why delay acquiring it? Shouldn’t we race there as fast as we can, subject maybe to the constraint that ICU capacity should not be outstripped? The people who are going to be exposed will be exposed anyway, but at least they’ll not be unemployed as long. And the people capable of isolating most diligently would like to be (safely) free of their diligent isolation as soon as possible, thank you. So, as Frum describes it, let’s (let them) “take the punch”.

Segregation is affluent America’s go to coping mechanism. There are always horrible things going on “over there”, whether over there is a famine in Africa, a war we are prosecuting in the Middle East, or poverty and violence in West Baltimore. The first amenity Americans seek as they grow affluent is a “nice neighborhood”. As a nation, we describe ourselves as blessed by the protection of our two wide oceans. As families &mdash if we are affluent, especially if we are white — we understand that we are protected by more subtle boundaries. Maybe that’s a sad injustice, maybe it’s because we’ve earned it, choose your poison and your political party. But whatever it is, we are used to it. It’s not surprising, when we read that COVID-19 has hit poorer communities, black communities, immigrant communities disproportionately. It may not be right, but it’s the way of the world, and whatever our political or ethical attitude, affluent Americans tacitly rely upon it. Manhattan, denser but whiter and richer, has less than half the COVID infection rate as the Bronx.

But the segregation that so often protects affluent America this time cannot free it. Remember how herd immunity works? If R0 is 3 and more two-thirds of the population is immune, then an infected infects less than one replacement and the virus dies out. But that assumes a uniform draw: the three people a new case would have infected are randomly chosen from the population, and at least two of them turn up immune (on average). But if the population is segmented, segregated, stratified, that won’t be true at all. Herd immunity might be achieved in the Bronx, but over in Manhattan, most of the privileged will remain immunologically naive. If you want to ride out the epidemic without exposure, it’s not enough to be in the top 25% to 33% of the most diligent isolators in the United States, or even in New York City. You have to be one of the top 25% to 33% of diligent isolators in your own community, among the people you interact with. If you are an affluent person who lives in a desirable neighborhood, who if liberated would work in a tony office, your implicit competitors in the coronavirus virginity game are not meatpackers or transit workers, but your neighbors and coworkers. And that’s a much tougher league. They have resources comparable to your own, or maybe better. The game of mortal attrition could last a long time. Months or years after the transit workers have taken their punch, your little world could still be ripe for an outbreak, if you all come out to play. So you won’t, not until there’s a vaccine or you are compelled by circumstance. Segregation will have helped to protect you, as it usually does. But this time, it will also imprison you.

So, if you are affluent, in a comfortable isolation but eager to escape it, don’t imagine that “hard men” like Governors Kemp or DeSantis are, however regrettably, accelerating your liberation with a herd-immunity strategy. They may think they are, but all they are in fact doing is risking the supply chains that your comfort and our political order depend upon. And, of course, putting lives of the less affluent, as precious and valuable as your own, needlessly at risk. But, though we fret, those lives seem to weigh little in our political system. Maybe if the affluent understand that “taking the punch” will not protect or liberate us, but may risk food shortages, outrage, and rebellion, maybe that will weigh more.

Four functions of markets

Perhaps, perhaps, this crisis marks an end of the “neoliberal era”.

The word “neoliberal” immediately provokes contention, but let’s not get fancy or upset here. For our purposes, neoliberalism is just a set of social heuristics: 1) that markets are in general the most capable institution for organizing human affairs; 2) that therefore, absent strong reasons to the contrary, use of market or market-like institutions should be maximized, “completed”, expanded even into domains heretofore intentionally insulated from them; and 3) that other institutions, including the state, should take a supportive, even subservient role: filling in gaps (“safety net”), addressing “market failures” that are presumed to be rare rather than pervasive, and only when a high burden of proof has been met. Any other intervention is a “distortion” to be avoided at all costs.

I think it fair to describe the period from about 1980 until the 2008 financial crisis as a neoliberal era, a period of time during which these social heuristics were widely accepted by governing elites and policy, in the United States and the broad West, was informed and shaped by them. The period from 2008 until now has been a kind of undead neoliberal era. Post Great Financial Crisis, neoliberal ideas have been discredited among much of the public and are actively contested even within governing elites. But, absent consensus on some new set of social heuristics, not much has actually changed. Material interests in the continuity of institutions shaped by neoliberalism remain strong.

Continuity now is broken. When this pandemic is “over” (whatever that means), the undead bones of neoliberal governance may well yet again gather themselves from the chaos and reconstitute the suave, smooth-talking vampire to whose predations we have grown unhappily accustomed. But they may not. We may find ourselves in a period of social experimentation and change. If so, as we diminish (not eliminate!) the role of markets, it is useful I think to understand the variety of functions that markets serve, so that framers of new institutions understand what will be excised, what may sometimes need to be replaced. So. Here are four functions of markets:

  1. Markets serve as Hayekian information processors
  2. Markets naturalize outcomes, defusing social conflict
  3. Markets “flip the incentives” surrounding resource utilization
  4. Markets launder history

Obviously, the list is not exhaustive.

I. Markets serve as Hayekian information processors 🔗

This is the function of markets that economists emphasize. Voluntary exchange plus a price system compose into a massively decentralized calculating system for allocating and distributing resources. Individual units (households, firms) need know or compute very little to participate in a gigantic computation that, ideally, ensures scarce, highly sought, resources go to where they are most needed (because the most-needers are willing to pay their high price), and are most eagerly produced (because those capable are eager to receive the high price). No formal match, no central tabulator is required, because any unit’s choice to purchase puts upward pressure on prices which in theory ripple immediately to everyone, and any unit’s choice to produce and sell has the opposite effect. Widely dispersed information about preferences and abundance are continuously summarized in a price vector while goods and services flow between units with no central coordination at all.

There are a lot of problems with this story. For one, “need” gets operationalized as purchasing power, so under conditions of inequality, the calculation yields an allocation of resources not to where they are most needed, but to whom is the richest. If producers or consumers have market power, they can rig the computation towards self-serving, socially destructive ends. Even under conditions of near equality, the informational case for markets declines as market institutions are transplanted from real commodities (which really are subject to diverse, widely dispersed preferences and availabilities) to more abstract settings (financial capital, health insurance) where preference diversity is not actually so great (people participating in capital markets are mostly trying to make money, humans who might get sick similarly want effective and pleasant care as cheaply as possible) and information is more asymmetrically held than widely dispersed (insiders and professionals know more about stocks than dispersed potential buyers and sellers, insurance buyers cannot really evaluate and compare 200 page contracts that implicate but omit thousands of negotiated prices).

Nevertheless, the sphere of real goods and services is not insignificant. Distortions of inequality may corrupt the computation for big city real estate but leave the marvels of a grocery store mostly intact. Markets really can function as Hayekian information processors. It really is remarkable how, despite a lot of consolidation and predation, a massive range of goods and services gets produced and distributed across huge geographies, among consumers and firms with extraordinarily heterogeneous requirements, pretty damned well under market institutions.

II. Markets naturalize outcomes, defusing social conflict 🔗

Adam Smith famously described market outcomes as “led by an invisible hand”. Of course, markets are social institutions, and market outcomes are made by human hands, sometimes myriad and dispersed, sometimes centralized among monopolists or rule-makers. In any case, to market participants, it is usually not obvious who decided the outcomes, or that there is meaningfully such a “who” at all. “Market forces” shape our fortunes and misfortunes, rather than identifiable human beings whose judgments we might appeal.

In the same way, for the same reasons, we respond very differently to a terrorist attack than to an even more devastating hurricane, many of us accept unfortunate market outcomes as things we just have to deal with, where had some identifiable individual prosecuted the same harm we might contest it, demand compensation, even engage in retaliatory violence. Market outcomes portray themselves as facts of nature rather than acts of man. In any social system, events and institutions will lead to outcomes that create winners and losers. A hundred families want to live in a building with room for only twenty. Some will get a spot, some won’t. If some politician dictated the allocation, the losers might get mad, might even try to get even. If the losers are “priced out”, well, that was just supply and demand, baby. Market forces. Whaddayagonnado?

This trick of markets doesn’t always work. In fact, the senescence of the neoliberal era corresponds not coincidentally with its working less and less. When it seems like identifiable parties controls market outcomes, we describe the market as “rigged”. Market outcomes are no longer perceived as natural, and those on the losing end become inclined to contest them. A decade ago, the resolution of the Global Financial Crisis created a lot of winners and losers in a manner that was widely, and accurately, perceived as politically determined (even as the winners, just before and again now, portray themselves as skillful participants in a free market). No one except perhaps Jamie Dimon attributes JPMorgan Chase’s success or continued existence to the dispassionate operation of an invisible hand. Over the past decade, growing awareness of inequality, along with widening gaps across social fissures of geography, race, and profession, have increased the degree to which “market losers” perceive themselves as victims of self-interested action by identifiable classes, rather than individuals caught by misfortune in the economic equivalent of a hurricane.

That this trick of markets is not now working so well does not mean it is dispensable. Our society is not now functioning very well. The collapse of markets’ ability to effectively naturalize outcomes and render them immune from political contestation is precisely the collapse of the legitimacy of a neoliberal order. But any system of large scale social coordination is going to require action that creates winners and losers, often arbitrarily, and will require some means of legitimating those actions, of preventing the natural and inevitable unhappiness of losers from translating into attacks on the system of coordination that render it unworkable.

“Democratic legitimacy” is the most commonly posited alternative to markets’ naturalization of outcomes, but I think that both in practical and moral terms, it’s an insufficient answer. There are no perfect democratic institutions, and ours are particularly imperfect. Losers often perceive government actions that thwart them as usurpations of rather than expressions of the “true will of the people”. If democratic legitimacy is defined in majoritarian terms, all of us I think would agree there can and have been actions supported by majorities against minorities that should not be deemed moral or legitimate. Democracy matters, a lot. It does contribute to losers’ willingness to tolerate actions with disparate impact. But to recover social contentment, we’ll either need to improve our democratic institutions so that outcomes are more universally perceived as legitimate, or we’ll need to find new tricks that replace markets’ depoliticization and naturalization of tough cookies. Probably we’ll need a lot of both.

III. Markets “flip the incentives” surrounding resource utilization 🔗

Where market logic has not yet penetrated, people’s incentives are usually to hoard utilization of resources they possess. Households with a guest room leave it empty most of the time. Private cars sit idle most of the time. From an owner’s perspective, this “underutlization” is rational. Letting other people use your resources is costly, in terms of wear and tear and risks of damaging misuse. Further, possession of idle resources confers option value. Your empty guest room would not be available when your friends swing through town, if you used it to house a homeless person. Your idle car is always there for you when you want or need it. You don’t have to call a cab and worry about when it will come or the price of your ride.

If we let markets infiltrate households, we can flip these incentives. If you AirBnB your guest room, all of a sudden you spend hours on the website futzing, trying to ensure that bed is occupied almost every night. If you start driving for Uber, your car will no longer be so idle. The same logic holds for capital goods as households. If you happen to own a big, street-level space in a city, without markets, you might use it to host occasional parties, or as an art gallery, or who knows? But once there is a market for commercial space, you’ll rent it to a highest bidder who likely will ensure it is used quite intensively, in order to make the rent.

This “flipping of incentives” is important, economically and environmentally. Economically, intensive use of a resource by many creates more value in aggregate than very occasional use by a single party. (Even much of the option value can be retained, albeit split between provider and customer, if access is priced so that usually there is some slack.) Environmentally, intensively shared resources can have a much smaller footprint than widely replicated, infrequently used resources. (If 10 households can be served by one Uber, we could build a lot less cars by Uberifying.) There are nuances. If the shared resource is very far away (e.g. one intensively run factory in China), the environmental costs of transportation at least partially offset the smaller footprint. And the intensive, “efficient”, resource use encouraged by status quo markets often comes at a cost in resilience, as we are learning too well during the current pandemic. Many underutilized, “redundant” resources are less likely to fail or become unavailable all at once than a very few fully utilized resources. Perhaps successor institutions to status quo markets will better balance redundancy and efficiency.

The most important resources for which markets “flip the incentives” are, well, us. Where markets are not very extensive, the burden of collaborations falls very heavily on people who want something for which they need assistance, rather than the people who could provide the assistance. As markets develop, this burden flips. In the beforetimes, your farm lacks a blacksmith, but larger farms have them, and your horse needs shoeing. So you wander to a neighbor and ask for help, negotiating compensation ad hoc or relying upon a spirit of reciprocity. As markets develop and specialize, blacksmiths become independent, competitive businesses who advertise and post prices. Perhaps touts even pester you as you trot by, hoping you will let them provide.

In less developed markets, we conserve our time and skills like we conserve other resources that we own. As markets develop, incentives emerge to keep our time and skills heavily utilized. Most of us are ambivalent about this. As consumers, we don’t love to be pestered by marketers. As producers, everpresent consciousness of “opportunity costs” can poison our creative and family lives. Nevertheless, this shifting of burdens from consumers to producers dramatically increases economic activity, and so prosperity by conventional measures, and I think prosperity in a real sense as well. Left alone, consumers want only occasionally. But producers produce most efficiently when they produce consistently and at scale. With the help of marketing (and macroeconomic policy), they strive to engineer want for the goods they efficiently produce.

On the one hand, this is the kind of treadmill many of us hope to escape with some retrenchment of neoliberalism. But on the other hand, I don’t think we want to escape too far. Overall we are better off in a world where our incentives are to seek to do one another favors, rather than a world in which need is the dominant incentive and we have to beg favors not eagerly provided.

For now, institutions that are insulated from market incentives, in particular government institutions, often do not have these incentives flipped, and that is a problem. As I write, millions of people are struggling to get unemployment benefits to which they are entitled from states (e.g. Florida) whose incentives were to make access difficult, not easy. Much of the conventional disdain for “bureaucrats” comes from a sense that they are people with no great reason to help us when need their help or at least their acquiescence. If the operators of Florida’s unemployment system had been rewarded for ensuring that every eligible beneficiary got their check, rather than for minimal outflow of state funds, that bureaucracy would probably behave quite differently. When politicians say governments should be “run like a businesses”, they mean lean, cheap, and efficient. But what appeals to most citizens in the phrase, I think, is that they should be accessible, helpful, and eager to please. As we pull back from neoliberalism, in part by tilting away from markets and towards governments as coordinators of our affairs, we should find ways to “flip the incentives” of state actors. One great use of a job guarantee corps would be to train up humans eager to serve as bridges between busy, distracted citizens and the governments who might serve them — basically taking a role as salespeople, but for the state.

Our political resentments play out mostly in national affairs, but antigovernment animus builds up mostly locally I think. Small businesspeople especially become jaded. They face a daunting range of risks related to local codes, registration, tax, and employment. Compliance, they are told, is their responsibility, the entrepreneur’s burden alone. Talk to owners of restaurants or small retail establishments in major US cities and you’ll hear horror stories of having to pay tens of thousands to one of a few architects able to get paperwork through city hall in order to renovate and open, of new investment demanded to bring a kitchen up to code when the prior tenant had just been operating with the same kitchen, of penalties for violating regulations they hadn’t realized existed, of getting shut down for zoning violations that make no sense at all. Whether you are on the left or the right, a neoliberal or social democrat, these just aren’t good things.

Regulation and compliance are essential, especially for dense cities. But helping people manage compliance ought to be a function of the state. If a restaurant kitchen needs better equipment to come to code, that becomes the restaurant’s property, and of course it should be purchased at the restaurant’s expense. But the process of bringing an an expert to inform the restauranteur of what their requirements will be in order to come to code ought to be a public function, rather than a domain of expensive specialists. Regulations exist to ensure valuable activities are conducted in ways that contribute to the public good, not to discourage those activities, or restrict opportunity to the very well capitalized. Spurred by “flipped” incentives, market producers routinely work to absolve customers of regulatory burdens. Car dealerships hire specialists to render the bureaucracy of a loan application almost invisible to customers, because they have an interest in the purchases overcoming that burden helps to enable. Government actors should face similar incentives. Large swathes of professions that now expensively, extractively manage compliance — law, accounting, finance, architecture — should migrate into the employ of states. Professionals should be rewarded both for quality of compliance and quantity of activity they enable. If you have a hare-brained idea for a business, City Hall should invite you in and offer you a coffee, just like a salesman at the car dealership. At both enterprises, most of those encounters will be “waste”, but the overall result will be well worth it.

It’s not obvious how to design effective public-sector institutions with flipped incentives. Neoliberal politicians have frequently attempted cargo-cultish, superficial mimicry of businesses, like having government employees refer to the people and businesses they interact with as “clients” or “customers”. That’s… not it. As the neoliberal moment hopefully recedes and we come to rely more on state coordination, this is a problem we should try to solve.

IV. Markets launder history 🔗

A crucial function of status quo market institutions is to hide details surrounding the provenance of commodities, which contributes to the interchangeability or fungibility of commodities. Apple can shift the location of its production across the globe, but from a customer perspective, the only input to the process is their money which is transformed, as if by magic, into an iPhone. Outside of market processes, nothing is like this. When we produce goods for ourselves — “cottage production” as the economists call it — every item has a history. The coffee table Dad built is not the same as any other coffee table, even if it is physically not so different from some other table. As markets develop, firms try to reconstitute this kind of nostalgic, positive history, using labels like “hand-made” or “artisanal”. These attempts not very persuasive.

However, the history of commodities is not always positive. When our credit card dip magically transforms into an iPhone, it is the same iPhone whether the cobalt inside it was mined by well-treated workers or child slaves. Like Vietnam vs China vs the US, these “back ends” are interchangeable, except to the degree that one makes the product cheaper, which we prefer. But human beings are moral animals. No aspect of our experience is naturally immune from our judgments, individually and communally, and judgments have huge effects on our behavior and experience. We might not enjoy our shrimp dinner, if rather than pulling the shrimp from plastic in the freezer, it was delivered to us directly by the trafficked crewman who may have harvested it. We might feel bad, and that might impair preference satisfaction.

This function of markets is obviously essential to our neoliberal status quo. Innocuously, it allows producers the flexibility to alter and improve the internals of ethical production processes without fragmenting markets. It’s for the best that an iPhone 8 be an iPhone 8 regardless of where the screen was produced. It simplifies exchange and contributes to efficiency. The producer’s brand becomes the only history that matters, and the producer has an incentive to ensure that, however dynamic and heterogenous the details of production, the consumer’s experience is uniform. Even where we understand production processes and regard them as ethical, too salient an awareness of their history might impair our enjoyment of a product, so in a sense make us poorer. We all understand what a sausage factory is, and have some idea of why we famously might prefer not to observe one. But we all know, even if we don’t live like we know, that in fact there’s a lot of history in the goods and services we consume we’d at least be ethically squeamish about. As I write, the Federal government has just effectively coerced meatpacking workers to labor in manifestly unsafe workplaces, in the name of preserving our food supply. How should that affect our relationship to bacon? How does it, when our experience of the packaged, refrigerated product is mostly unaltered? In ordinary times, lots of us are fond of animals but do not become vegetarians. If we were required to personally kill the animals we eat, many of us would enjoy our carnivore lifestyle quite a bit less. Again, the abstraction markets offer make us richer, in the sense that we enjoy what we otherwise would not. Okay, maybe that’s gross, and we should all be vegetarians. But then what do you think about the conditions under which migrant workers harvest our garlic?

There is a case for this laundering of history. Modern production processes are complicated, involving a many stages and circumstances, each of which involves tradeoffs, conflicts, and shades of gray. If we tried as individuals to police all that, we’d do a poor job in an ethical sense and make ourselves poor in a practical sense. Instead we outsource the ethical choices to state regulation of production and trade. Then so long as commodities are produced and sold in legal markets, every purchase comes with a dollop of absolution. Individually, we might not all agree on the choices the state makes, but hey, this is a democracy right? On the whole, the theory goes, our choices will be more effective when they are collective and enforced, rather than if we tried to rely on more perfectly individualized consumer judgments, boycotts or such. So ethics as well as expedience are on the side of this arrangement.

Of course if neoliberalism is defined in part by an attitude of state subservience towards markets, perhaps, in a neoliberal era, it should not surprise us if expedience came to eclipse ethics. Many of us now think that modern supply chains are sexy Apple packaging wrapped around horrifically ugly production arrangements, and that legal and financial markets often serve to wrap theft and extraction in pretty paper bow ties. This “function” of markets is part of what motivates us to challenge them. But it remains to be answered how much and just how we might want to retain the blissful ignorance delivered by virgin commodities. Inscribing all the history markets erase on a blockchain or whatever, and then relying on individuals to evaluate the ethics of every stage of production of every good and service they consume, does not seem workable or effective. On the other hand, if markets launder history too well, that short-circuits the capacity of democratic politics to insist upon ethical production, as voters are shielded from the harms of cruel supply chains but enjoy the benefits of lower prices. Some variant of the status quo, where ethical choices are collectively made and enforced by states, seems like the only way forward. (Perhaps I am too uncreative?) It’s one thing to speak abstractly about retrenching from neoliberalism, with its corrosive effect on collective action in pursuit of moral ends. But what, concretely, do the political institutions and processes look like that would render it ethical for us to enjoy the goods and services available for purchase as though they had no history? What would be the trade-offs in what we perceive as prosperity if we instated those institutions?

Update History:

  • 3-May-2020, 2:10 p.m. EDT: “in a price vector while good goods and services flow”; “…if markets launder history too effectively well, that…”

Expertise, interest, and community colleges

Perhaps the thorniest metaproblem modern societies face is the fact that expertise and interest are deeply entangled. On the one hand, the scale, scope, and technological sophistication of modern societies mean that it is absolutely essential that we develop, train, and rely upon highly specialized forms of expertise that will not be widely accessible to the layman. On the other hand, the fact that such expertise tends not to be uniformly distributed within political communities, but becomes concentrated in groups whose particular interests may diverge quite widely from those of other communities in their polities, creates a problem. Experts are human. Even when they have the best of intentions, human beings often mistake virtues for the tangible communities in which they and their neighbors and coworkers and children mingle as virtues for the polity as a whole. When they are less well intentioned, or less self critical, experts and the professional associations they organize provide advice quite directly inflected by self interest. Experts. We’ve got to trust them, but we can’t trust them. There is no perfect solution to this. But that doesn’t mean that nothing can be done.

We in the United States have been swinging between the poles of this dilemma like a pendulum undergoing an exorcism. Our experience this millennium through 2016 was one of justifiable disillusionment with technocracy. The 2008 financial crisis, and the policy response to that crisis, taught many of us to be skeptical of expert opinion. The seeds of the crisis were planted by experts, by technically sophisticated financial professionals who allowed themselves to overlook the caveats and assumptions of their own models when going full speed ahead seemed in the interest of their careers. The field was then fertilized by boosterism on the part policy and academic intellectuals. The “wonks” revised regulations to make ever more dangerous practices permissible, while academics, at least in the most prestigious precincts of economics and finance, tacitly accepted or openly declared the new finance sound. Finally, when it all broke down, the starkest dilemma imaginable between interest and expertise emerged: The people who best understood the collapsing system, arguably the only people who understood it with sufficient institutional color to get the details right, were the experts who had built it, whose careers and financial interests were directly bound up in it. Unsurprisingly, the solution that emerged from tapping this expertise — the absolutely necessary only path to save the world! — turned out to be quite gentle on banks and professionals and the creditor class generally, but not quite so gentle for debtors and ordinary workers. Technocracy discredited itself. So we elected a guy who seemed like kryptonite to technocrats.

Now we are learning the opposite lesson. If tapping bankers to resolve a financial crisis pits the need to rely upon experts against concerns over conflicts of interest, tapping epidemiologists to forestall (too late!) or manage a pandemic implicates almost no such concern. With narrow (though sometimes wealthy and influential) exceptions, the interests of a political community are unusually aligned in the face of a contagious disease. Anyone can catch it, anyone who catches it could suffer or become disabled or die, anyone who catches it increases the danger for everybody else. Yes, there are gradations of risk between young and old, healthy and less healthy, as well as, shamefully, rich and poor, black and white. But almost everyone faces meaningful direct risks. And the knock-on effects of an uncontrolled pandemic, the ruin of a society and an economy the event might leave behind, would be experienced almost universally. Plutocrats on yachts might exempt themselves, but not your upper middle class scientist. If ever there was a crisis in which “trust the experts” should be safe advice, it’s this one. But we elected a guy who knows better by knowing nothing at all, and we are finding elections do have consequences.

We need to create better options for ourselves than a choice between Larry Summers or Donald Trump. Unchecked technocrats often do become untrustworthy mandarins who govern, with or without the best of intentions, in ways that benefit the communities of their own experience, and maybe the fashionably disadvantaged, while offloading costs to communities that do not attract their notice. Know-nothings govern to the benefit of almost no one, except perhaps their own cronies and a part of their political base to whom they can redirect some spoils from the shrinking pie. One solution, advocated by John Dewey, is better, more widespread education. From an excellent summary by Josh Braun (ht Helen De Cruz):

Thus the specialization and abstraction that have entered into science and industry serve the elite at the expense of the populus. Dewey insists that until the fruits of science and elite knowledge can be made accessible to the layperson, the public will remain eclipsed and alienated, while the elite will continue their rule. Thus, improved education and communication are necessary if specialized knowledge is to be opened to the masses and the public thereby emancipated. Until such time as this improved communication is available, democracy, in its ideal form, cannot exist. And until ideas and modes of governance are road-tested through social experimentation in everyday life, for and by the public, our knowledge of how best to regulate the populus cannot increase, and scientific ideas cannot serve the common good.

It has become a bromide, among the educated classes, that if only the public were better educated, we could have an effective democracy. I am increasingly skeptical of this idea. I think it forgivable of Dewey writing in 1927, but the scope of expertise required to manage a modern society has expanded dramatically since then. Citizens generally would have to become freakish polymaths in order to be able to police the range of options offered by experts, to distinguish proposals that would serve the public interest from proposals that purport to serve the public interest but under cover of technical legerdemain are skewed to benefit parochial interests. It just isn’t plausible. Experts need to train, for years. We cannot all train in everything.

What is plausible, however, is to counter the tendency of expertise to coalesce into narrow and segregated communities. We can’t make every citizen an expert in everything, but we can put experts in everything directly in every citizen’s community. Whether you live in Boston, in Buffalo, or in Bismarck, North Dakota, you should know an epidemiologist, or at least someone you know should know an epidemiologist. Whether you are part of an upscale community or a poor community, a black community or a white community, an urban community or a rural community, there should be people in and of your community — people you go to church with, or parents of your kids’ classmates — who do have the expertise, who don’t share the interests of a banker on Wall Street or a professor at Harvard, whose fortunes and interests are aligned and entangled with your own.

It is common these days to talk about the importance of “representation of diverse communities”. Usually that conversation is about who sits in the top tiers of our miserably polarized and hierarchical society. It’s important, we say, that women, people of color, LGBT people be represented in the halls of political power, among the tech engineers who increasingly shape our lives, on corporate boardrooms. And it is important, as far as that goes, as long as we retain such a miserably polarized and hierarchical society.

But this approach makes representatives of emigrants from our communities. We can only hope that they don’t entirely “go native”, that they remember their roots enough to make a difference for the people they represent but whose interests they share less and less. A different approach might be to insist the institutions that rule us — including, necessarily, technocratic expertise — be composed of representatives who remain in and of our diverse communities, who do not migrate and segregate into new communities whose interests inevitably diverge from our own. That would improve the quality of policy advice, as a broader community of experts would be less likely to mistake a parochial interest for the general interest. It would improve the quality of democracy, as citizens would have direct, unmediated humans that they know and trust to rely upon as a check against what they hear from distant experts via also not-necessarily-trustworthy media.

Perhaps the most underestimated institution of contemporary American life is the community college. Community colleges are aptly named. They are the only class of higher-ed institutions that truly devote themselves to service of their communities. Teaching happens at all colleges and universities. But at major universities, the incentives and prestige skew towards research. Teaching is an activity complementary to research, it helps develop ideas, and from a faculty perspective that is its main saving grace. Academic careers are not made by taking underprepared students and leaving them without great mastery, but still farther along than before. Small liberal arts colleges are all about teaching, but teaching students that are already excellent. The incentives there are to produce academically or professionally outstanding alums. But most human beings, the people we today are relying upon to clerk grocery stores and deliver Amazon packages, pack meat and drive trucks, will never be academically or professionally outstanding, even though each of them will be outstanding in their own ways, among their own families, friends, and coworkers. Community colleges take all comers, from the communities they serve, to help each student meet their own personal goals, and to build more educated local communities, across professional lines. Their success is not measured by the fraction of those students who go on to Harvard. On the contrary, most will stay close by.

Traditionally, the functions of a university are supposed to be teaching, research, and community service. Liberal arts colleges devote themselves primarily to teaching, but teaching the few. Major universities devote themselves primarily to research, with teaching as an important complement and source of public support. Community colleges devote themselves to community service, via teaching. I think we should dramatically expand the role of community colleges. There should be many more of them. They should continue to serve communities by teaching all comers, but they should go beyond that. They should embrace a much broader community service role. For communities everywhere, they should serve as very local repositories of the technocratic expertise by which the world must increasingly be ruled. Their faculties should be expanded dramatically, along lines that would not be determined solely be instructional demand. The local community college should have an epidemiologist, and a financial economist, and representatives of many other disciplines, regardless of whether students fill out a full schedule of classes for them. They should be there, because the community and its citizens require the expertise of people trained in those professions in order to participate in our democracy, and it requires those people remain independent of the roles they might have if they were employed by other organizations in their communities. You want an expert who is not employed by a bank advising citizens on the latest finreg proposal. You want an epidemiologist who can’t be muzzled or fired by the governor if she disagrees with the governor’s approach to a pandemic. These professors should be evaluated in part on their quality as teachers. But coequally, they should be evaluated on their devotion to and entanglement with the local community. Holding events to inform the general public, joining schmoozefests where citizens and politicians mingle, responding to e-mails and phone calls, accepting visits from the mom concerned about 5G radiation or the kid who found a bug he hopes has never been discovered, these things would all be part of the job. When matters of broad public concern are discussed in the community, these faculty would be expected to provide a fair account of their profession’s current view, both where there is consensus and where there is controversy, as well as weigh in with their own perspective if they wish. They would not be expected to contribute new primary research. But they could and should contribute to the research process, participating in public conversation with letters and commentary, and especially via peer review.

The existing peer review process often involves farming papers from a narrow specialist community to highly regarded other members of that specialist community. There are lots of problems with that. Groupthink can permit a body of work to go too long unchallenged, as researchers who share too similar assumptions evaluate one another. (This has been a big problem in economics.) “Blind” peer review is often not blind within a specialist community, because researchers can easily figure out whose work they are commenting on, so personal alliances or rivalries can seep into the process. Asking high prestige researchers outside of authors’ specialist community to review papers seems like a poor use of those researchers’ time, as they would have to bring themselves up to speed on the work while facing large opportunity costs within their own specializations. A cadre of faculty whose role is to stay abreast of their disciplines, and stay epistemologically in touch with the broad political community, would provide a useful complement to specialist peer review. It could not replace existing practice: only specialists can evaluate the details of other specialists work. But an inside/outside perspective can provide a sanity check where groupthink might be emerging, can bring in outside strands that narrow specialists might miss, and can help improve the accessibility of scientists’ work both within their disciples and to broader publics by pointing out where things seem unclear even to highly informed nonspecialists. Peer review roles for community scientists would both improve the quality of science, and would help ensure that the bridge these people are meant to provide between our communities and continually evolving disciplines is not too easily severed by time.

The fact that expertise and interest are usually entangled is a huge problem for the governance of contemporary societies. Our policy response to the 2008 financial crisis was, in my view, clearly deformed by this entanglement, and the sociopolitical consequences of that have been devastating. During the current pandemic, our failure to establish widespread roots for trust in expertise where expertise is in fact trustworthy has caused a mass fatality. Perhaps my proposal, an expanded role for community scientists at more local and ubiquitous community colleges, is a good way to address this problem. Perhaps you can think of better ways.

But we had better figure this out.

Pandemic diary 2020-03-24: Toying with collapse

Lately, the President is talking up the notion that we “can’t let the cure be worse than the problem itself”. He’s toying with relaxing the suppression measures that are, for the moment, our best hope of collective survival.

Let me elaborate on that.

Too often, discussions about COVID-19 are framed in very individualistic terms. What is the true mortality rate? If X people will die, is preventing that worth a tradeoff of Y GDP?

Even on very optimistic assumptions about the mortality rate and pessimistic assumptions about economic cost, the answer to that question should be “Yes”. But that’s not what I want to write about.

COVID-19 is not just a disease that is infecting us as individuals. It has infected us as a society. The financial fallout, the flailing markets, these are the social equivalent of a mid-grade fever, an unpleasant and uncomfortable side effect of the work our society is performing to suppress and defeat the infection. There may be ways of reducing the unpleasantness without impairing the effectiveness of the response, various forms of economic stimulus or monetary loosening as a kind of social tylenol. Maybe those are worth considering. Some have been tried. But nothing would be more stupid, more suicidal, than to suppress the immune response in order to suppress the fever.

That is what ending our isolation now — what sending everybody back to offices, schools, restaurants, beaches, and bars — would amount to. It might well relieve the “fever” short term. The stock market is up this morning! But it radically increases the likelihood that the patient — our polity, our society — dies.

How would that happen? What’s the microstructure of this purported social collapse? How would putting people to work again be bad?

We desperately need people to work. All of us staying home will not save us. But some people’s work is much more critical than others’ to our society’s collective viability. We obviously need medical personnel to work. For them to work effectively, we desperately need the people who are capable of producing and ramping up production of PPE (“personal protective equipment”) to work. Perhaps more desperately, we need our agricultural and food supply chain to be producing the calories and nutrients each and all of us need to get through this. We need grocery store clerks, stockers, shoppers (for delivery and pick-up orders) to work. We need truck drivers a-truckin’. We need Amazon and UPS and FedEx, permitting us to get what we need with minimal opportunity to cough on one another. We need fire departments and police. We need the digital platforms and communications infrastructure. We need people delivering essentials to the elderly. We need the people who can develop and ramp up testing, tracking, and treatment. We desperately need people to work.

But if you are not one of these people, your staying at home — working as much as you can if you can or not at all of you can’t — is not “waste”. It is making a huge positive contribution to our society, by delaying the moment when it will be impossible to persuade a critical mass of these very essential workers to do their jobs, because many of them are sick and the rest of them are too afraid of getting sick.

Whatever the final mortality rate turns out to be in places that retain control and never let the illness rate outstrip the capacity of their health care system, even if it is “only” one percent, if the outbreak proceeds through the population towards “herd immunity” levels, pretty much everyone will personally know someone who dies, like 20 people whose illness is severe enough to at least require supplementary oxygen to keep them breathing, and four or five people who required the incredibly unpleasant ordeal of mechanical ventilation. In a peak that outstrips health care capacity, many more than one of those twenty severe acquaintances will die. They will be dropping like files, all at once. However much you shout that the individual risk for a twenty-something is low, under these conditions, most people just won’t go out. We know people are bad at weighing their risks, fearing a shark attack from an occasional ocean swim more than the much more likely auto accident during a daily commute. People you personally know suffering and dying around you will be much more salient, and much more terrifying, than any risk you have ever experienced. Exhortations by the best and brightest — who would, after all, have permitted this to happen, in whom no great trust by this point would repose — will not be effective. The factories that should be producing the equipment that might save doctors’ will be too understaffed to function, let alone increase production. The trucks will slow to a trickle. The groceries will close.

People will stay in while they can, scrounge out when they are hungry, loot closed stores or their neighbors’ shelves if that’s what it takes to survive. Armed groups will form self-protection militia, or predatory gangs, depending on how you want to look at it, depending how desperate they become. People will be very sad, each and every survivor grieving loved ones, and very angry. People who are ordinarily good will find themselves doing terrible things, because against the backdrop of what has been done to them, it feels justified.

The continent on which the United States sits will endure the pandemic. So will the majority of the population (though possibly a much less overwhelming majority than many people imagine). But the to-some-degree civilized society we have inhabited? The well-oiled economic machine the President claims he wants to save? Democracy and the Constitutional order? The unity of these United States? They may well not survive this event. And at the individual level, the mortality rate will be much much higher than 1%, Wuhan’s 4%, Italy’s 8%.

Those are the stakes.

All of this is preventable. We don’t need to let this happen.

Most of us can stay at home, and be vigilant about social distance. We can buy enough time for essential workers, the heroes of this play, to ramp up PPE, health-care capacity, and testing capacity while keeping us all fed. We can distribute resources — cash, food, however we do it — so that most of us can stay at home without starving.

Once we are prepared, we can test pervasively, and only isolate the people who need to be isolated. We can use IT tools, which even on a voluntaristic, opt-in basis can be extremely effective at tracing contacts when an infection is discovered, as long as infections are infrequent. In two or three months, we can go back to a somewhat slower version of ordinary life, if we can just keep calm and carry in now. And within a period of a six to 18 months, we can expect effective treatments and/or a vaccine to appear, and then we can get back to our ordinary, beautiful, lives. Our perhaps sadder, wiser, ordinary, beautiful, lives.

I love you.

Predatory precarity

I was reading Matt Stoller’s newsletter this morning:

To put it into words, the problem we have is corruption in the government contracting world, aided by immense amounts of useless overpaid make work. In 2011, an antitrust attorney did a report on how we overpay for government contracting. In service of ‘shrinking government,’ policymakers chose to set up a system where instead of hiring an engineer as a government employee for, say, $120,000 a year, they paid a consulting firm like Booz Allen $500,000 a year for a similar engineer. The resulting system is both more expensive and more bureaucratic.

Here’s one example I grabbed from a public government contracting schedule. The rate negotiated by the government’s General Services Administration for Boston Consulting Group is $33,063.75/week to get a single relatively junior contractor.

I’m certainly with Matt on general disgust at the gorging of the trough by the contactor-consultancy complex, and have long favored rebalancing government employment away from contractors, back towards directly employed civil servants. So, yay. That’s the correct position, and it’s an easy one to take, so I take it.

But it is a bit too easy. The Boston Consulting Group may be charging $33,063.75 per week for the services of a single kind-of-bright conformist straight out of business school. But that kid, he isn’t getting paid $1.7M a year. He’s probably “only” paid 10% of that. From that take, his managers and their managers, their assistants and his, not to mention of course the firm’s shareholders, are all getting a piece of that sweet government slop. And all those guys and gals, they are living in places like Arlington, VA, and some of them have families and mortgages on houses they indebted themselves perhaps millions of dollars to inhabit.

There are people at the top of the American food chain who are stupid rich, for whom questions of making ends meet and financial security are laughably distant. People like that, they are easy to deal with. If it was “us” (whoever the fuck we are) versus only them, politics would be easy. We’d have taxed the billionaires to pay their fair share a long time ago.

But most of the people towards the top of the American food chain are not stupid rich, but stupidly rich. They “make” sums of money that by any fair reckoning, obviously in a global context but even in an American context, are huge. But they plow that affluence into bidding wars on incredibly (if artificially) scarce social goods. Nobody “needs” to live in Arlington (or my own San Francisco). No one’s kid “has” to go to private school (or for the more woke among us, notionally public schools rendered exclusive by the cost of nearby housing). If you make price your first priority in, say, shopping for preschool or daycare, perhaps you can find something reasonable.

But most of us, if we are no longer free, young, and single, if we are rich enough to pay the vig you have to pay to be sure your kid’s preschool will in fact be “safe” and “nurturing”, well, we pay it. If we haven’t rigged our housing choice so that the local public school is good enough, we pay up for a private school. If we can afford to be choosy, if we are really rich, we pay up for the private school that devotes significant resources to the searches and scholarships that deliver, in Nikole Hannah-Jones memorable words, a “carefully curated integration, the kind that allows many white parents to boast that their children’s public schools look like the United Nations.” It is extraordinarily expensive to be both comfortable and some facsimile of virtuous. You’ll never see as many rainbow flags as you see in Marin County.

The point of this is not that you should have sympathy for the Arlingtonians (or San Franciscans). Fuck ’em (er, us). But you are missing something important, as a matter of politics if nothing else, if you don’t get that the people who are your predators financially are, in their turn, someone else’s prey. Part of why the legalized corruption that is the vast bulk of the (dollar-weighted) US economy is so immovable is that the people whose lobbyists have cornered markets to ensure they stay overpaid are desperately frightened of not being overpaid, because if they were not overpaid they would become unable to make all the absurd overpayments that are now required to live what people of my generation (and race, and class) understood to be an ordinary life. It’s turtles all the way down, each one collecting a toll and wondering how it’s gonna pay the next diapsid.

Perhaps the most straightforward examples of all this, much more sympathetic than Boston Consulting Group swindlers, are doctors. It’s well and good to rail against health insurance companies and big pharma, and really, fuck ’em so hard they disappear into perpetual orgasm and we never have to encounter them again. But we know that healthcare in the US is exorbitantly expensive compared to anywhere else, and we also know, even if it is not shouted as loudly in political stump speeches, that a big part of this is that doctors are paid roughly twice as much in America as they are paid elsewhere in the developed world.

But what would it mean, really, to cut US doctors’ salaries in half? In theory, if you are the most imperceptive sort of economist, it means they could live as well as doctors do in Europe, which is not so bad. US doctors are paid twice as much in what is imaginatively described as “real terms”, so they should be able to purchase the same goods and services with their income as their European peers do. Where’s the problem?

But economists’ “real terms” do not measure the realest terms at all, the social relations in which the dance of our production and consumption is embedded. If you cut doctors’ salaries in half tomorrow, they would have to sell their mortgaged, absurdly expensive homes. At half their present salary, doctors would no longer be able to afford to live amongst “peer” professions like lawyers, management consultants, middling corporate executives, and the employees of surveillance monopolists. Doctors would fall precipitously from the social class, embedded in geography and consumption habits, to which many of them even now cling only precariously. More calamitously, they would lose the capacity to produce or reproduce membership in that social class for their children, often the most expensive amenity American professionals seek to purchase.

Doctors in France don’t have this problem because they live in a society less stratified than the one that we are unfortunate to inhabit. In societies in which the lives and prospects of the rich and less rich are not so divergent, people can afford to be a bit less rich. After all, even in the United States, the problem is not scarcity in a straightforward economic sense. We can build, to a first approximation, as much great housing as we want. The skills required to care for and educate kids are reproducible. They could be elastically and economically supplied. The scarcity of a slot at Harvard (and that slot’s many antecedents, all the way back to birth) has little to do with some ingrained incapacity to educate wonderful teachers.

The solution to the problem of “positional goods”, which are inherently zero-sum and inelastically supplied, is supposed to be the infinite multiplicity of social dimensions over which we can measure our positions (ht Arjun Narayan). The most famous exposition of this view is perhaps David Brooks’ from On Paradise Drive:

“Know thyself,” the Greek philosopher advised. But of course this is nonsense. In the world of self-reinforcing clique communities, the people who are truly happy live by the maxim “Overrate thyself.” They live in a community that reinforces their values every day. The anthropology professor can stride through life knowing she was unanimously elected chairwoman of her crunchy suburb’s sustainable-growth study seminar. She wears the locally approved status symbols: the Tibet-motif dangly earrings, the Andrea Dworkin-inspired hairstyle, the peasant blouse, and the public-broadcasting tote bag… Meanwhile, sitting in the next seat of the coach section on some Southwest Airlines flight, there might be a midlevel executive from a postwar suburb who’s similarly rich in self-esteem. But he lives in a different clique, so he is validated and reinforced according to entirely different criteria and by entirely different institutions… [H]e has been named Payroll Person of the Year by the West Coast Regional Payroll Professional Association. He is interested in College Football and tassels. His loafers have tassels. His golf bags have tassels. If he could put tassels around the Oklahoma football vanity license plate on his Cadillac Escalade, his life would be complete.

It’s hard to know, from this excerpt, which of these two is richer, the anthropology professor or the payroll guy. Both crouch together in the eternal middle class of unreserved coach seating on a Southwest Airlines flight. And in that skyward netherworld, On Paradise Flight, Brooks would be right. When there are not objective correlates of anyone’s definition of positional status, each of us can choose whichever measure of position flatters us most. We need agree only that is it gauche to try to impose our values on others for us all to live as happiest and best, quietly pitying our inferiors even as we cheerfully pass along a bag of pretzels.

But what it means to live in a stratified society, precisely what it means to live in a stratified society, is that there are objective correlates to position along dimensions that individuals and communities cannot themselves choose. There are positional dimensions whose importance is a social fact, not arbitrary, but real as social facts are, by virtue of their consequences. In such a society, positional goods with desirable correlates, inherently scarce and inelastically supplied, become extremely valuable. In some societies, those goods may be rationed by custom, or by heredity, by caste or race. But to the degree that a society is “liberal” and capitalist, they will be price-rationed, as they largely (but incompletely) are in our American society.

In a stratified, liberal capitalist society, the ability to command market power, to charge a margin sufficiently above the cost of inputs to cover the purchase of positional goods, becomes the definition of caste. When goods like health, comfort, safety, and ones children’s life prospects are effectively price-rationed, individuals will lever themselves to the hilt to purchase their place. The result is a strange precariot, objectively wealthy, educated and in a certain sense well-intended, who justify as a matter of defensive necessity participation in arrangements whose ugliness they cannot quite not see. In aggregate, they are predators, but individually they are also prey, and they feel embattled. So long as the intensity of stratification endures, they will feel like they have little choice but to participate in, even to collude to entrench, the institutions that secure their market power and their relatively decent place.

Reforming government contracting, controlling medical costs, breaking up big-tech, opening the professions to international competition, these sound technocratic, even “pro-market”. But under present levels of stratification, the consequences of these things would be a revolution, whole swathes of society accustomed to status and political enfranchisement would find themselves banished towards a “normal” they used to only read about, opiate crises and deaths of despair, towards loss of the “privilege” it has become some of their custom to magnanimously and ostentatiously “check”. Did I say they? I mean we, of course.

But of course, not doing these things means continuing to tolerate an increasingly predatory, dysfunctional, stagnant society. It means continuing deaths of despair, even as we hustle desperately to try to ensure that they are not our deaths, or our children’s. Even for its current beneficiaries, the present system is a game of musical chairs. As time goes on, with each round, yet more chairs are yanked from the game.

The only way out of this, the only escape, is to reduce the degree of stratification, the degree to which outcomes depend on our capacity to buy price-rationed positional goods. Only when the stakes are lower will be find ourselves able to tolerate, to risk, an economy that delivers increasing quantity and quality of goods and services at decreasing prices, rather than one that sustains markups upon which we, or some of us, with white knuckles must depend.

Lower the stakes.


p.s. While I was writing, the wonderfully pseudonymous “Lester Burnham” tweeted me this, which seems related.

The externality lens

Will Wilkinson has written a provocative paper that tries to explain a remarkable regularity in American politics. Wilkinson writes:

[T]here is now no such thing as a Republican city. “As you go from the center of cities out through the suburbs and into rural areas, you traverse in a linear fashion from Democratic to Republican places,” Stanford political scientist Jonathan Rodden has observed. The electorate is typically equal parts Democrat and Republican at about 900 people per square mile, according to Mark Muro of Brookings. The exact number varies a bit from place to place; higher in more Republican and lower in more Democratic states. Overall, majorities tend to flip from blue to red roughly where commuter suburbs give way to “exurban” sprawl. That’s where the political boundary of the density divide is drawn.

Higher population density predicts higher Democratic vote share even in small cities in deep red counties in deep red states.

Wilkinson explains this “density divide” by suggesting the process of urbanization sorts people with relatively fixed prior characteristics (ethnicity, ethnocentrism, personality type, educational attainment) into different geographies, and then ghettoization within now more homogeneous places further entrenches those differences. Wilkinson’s perspective is worthy of careful consideration. I’m not writing to dispute or endorse his view, but to offer an alternative explanation that might or might not complement it. (Our tendency to like debates hot—and to attach our egos to this view or that—often leaves us arguing hypotheses as though they are mutually exclusive when, in social affairs, they usually are not.)

A very simple explanation for Wilkinson’s density divide might have to do with people’s intuitions about the pervasiveness of externalities. People who live in dense places correctly perceive that the things their neighbors do blow back upon them. If a neighbor wants to tear-down her single family home and replace it with a midrise apartment building, the typical urbanite doesn’t think “it’s her property, she can do what she wants”. She goes straight to the planning commission to complain about parking and shadows. If someone wants to open up a strip joint, a gun range, even a posh bar in a dense city, urbanites instinctively understand that those choices will have consequences for people other than the entrepreneur and her clients, and demand a regulatory process to balance the external costs (and benefits, at least in theory) against the benefits that business stakeholders would enjoy. This view, that most potential actions have significant repercussions for people who do not voluntarily choose to participate in them, we’ll call externality pessimism.

In more rural areas, libertarian intuitions seem more sensible. For many actions, external costs decline pretty directly with distance. In places sufficiently sprawled that parking is rarely an issue but nearly all interaction is mediated by an automobile journey, a kind of hermetically sealed, climate-controlled pod-world serves as both an insulator and diffuser. The external cost to you if some kind of eyesore becomes your “neighbor” is much less if your neighbor is well down the road and you just have to drive past it than if it is literally adjacent to your home. The dangers you (or at least wussy urbanites like me) might fear from rough clientele at a gun range are attenuated if the clientele doesn’t actually congregate anywhere in particular, because once they step from the parking lot into their vehicles they are everywhere and nowhere at once. Gun ownership itself looks very different from the perspective of someone living in the countryside, for whom policing and eyes-on-the-street mutual supervision cannot be relied upon and an unintended stray bullet is unlikely to hit anything more vulnerable than a tree, than within a city. In an urban context, the external costs of pervasive gun ownership are large. Weapons might fall into the hands of lunatics and criminals, and there are always lunatics and criminals nearby. Incautious shots intended recreationally could harm or kill someone. The petty conflicts that are ubiquitous in urban life, that in the ordinary course of things flare hot and then are quickly forgotten, might needlessly escalate to tragedy, when the satisfying punctuation of a trigger is near at hand. People who live in sprawl or genuinely rural places just don’t bump into one another as much. Their homes are their castles. Driveways and garages, cul-de-sacs and long ribbons of asphalt, serve as moats. A real sphere of privacy exists, where in general the effects, good and bad, of people’s actions are mostly restricted to those within the household. If we accept that, except in extreme circumstances, households are best placed to see to their own interests, then there is not much call or place for external regulation. What people do with and on their own property is, to a good approximation, their own affair, and meddling by outsiders, whether well-intended or corrupt, is likely to do more harm than good. This is externality optimism. If the costs and benefits of people’s choices are fully internalized, they can be left to do whatever they wish.

If we think not so much about the current, Trumpified Republican party (there will be another lens for that!), but the coalition that used to flatter itself as the Party of Reagan, Wilkinson’s density divide becomes largely explainable in terms of where people understandably sit between externality optimism and pessimism. By virtue of direct lived experience, people living at high densities perceive nearly all actions as interactions and seek (though rarely find) a competent and fair regulatory framework to mediate conflicts of interest. People living at low densities experience a world much closer to Econ 101 models: interaction is not the default, and when it is sought, markets can coordinate mutually beneficial outcomes. External regulation is counterproductive.

Many of my readers will, I think, see this as an unduly charitable read of even the pre-Trump Republican Party. Maybe. One of my aims in this exercise is to find bases for some charity between factions, without which I think we have a great deal to fear. Still, let’s go through why I also think the pre-Trump Republican Party was misguided in its externality optimism, despite (I claim) how understandable that optimism may have been from the lived experience of individuals who affiliate with that party.

Once upon a time, a person’s direct lived experience may have served as a sufficient proxy for the forces that affect people’s lives. But that time has long passed. Technology and the scale at which our economy and finance has become organized mean that we all live in a crowded city, whether we notice it or not. Urbanites, in a sense, have an unearned advantage because our direct experience forms intuitions that better match a reality that in fact we all share than those that might be formed in salubrious isolation on a Wyoming ranch. Consider this phenomenal story by Claire Kelloway (ht Matt Stoller) on the tremendous squeeze Big Ag has placed on predominantly Republican farmers.

Market concentration is what I refer to as a power externality. At every step of the way, firms like Monsanto may have gained their market strangleholds via notionally voluntary transactions, all parties to which believed in their interest. But the accumulated effect of those transactions is to increase the bargaining power of just a few firms and undermine the bargaining power of future counterparties, who may not have consented to any of the earlier transactions. For example, much of what is sought by the acquirer in a merger is a better “market position”. That benefit is internal to the transaction: Both the acquirer and the target often understand its economic value, and price negotiations determine how the benefit will be shared. But the benefit of a better market position, which translates to increased monopoly or monopsony power, is created by increases in revenue from future customers or reductions of payments to future vendors, all of whom are not parties to the merger. Antitrust regulation, in this sense, can be understood to be much the same as land use regulation in cities. It exists to balance the interests of transactors who internalize benefits against costs the transaction will impose upon third parties.

Farmers aren’t stupid. They fully understand how and by whom they are being squeezed, and their ex-urban perspective on gun rights notwithstanding, countering the power of Big Ag might be a way for Democrats to make inroads into rural America (as Kelloway argues). This kind of vulnerability helps to explain Republican operatives’ enthusiasm for emphasizing “culture”, which allows them to highlight the small, the kind of controversies rank-and-file voters might experience very locally, and call attention to the absurdity and perniciousness of meddling by governments or self-appointed do-gooders into matters where the rural peace would best be kept by leaving people alone and perhaps building good fences.

Climate change is another domain where I think the externality lens can help us understand how the parties have sorted. Droughts, violent storms, floods, and heat waves do not discriminate between rural people and city dwellers. These catastrophes are indifferent to the culture wars that flamboyantly mark our tribes. But people from lower density environments just intuitively have less reason to believe in weird, counterintuitive consequences of apparently benign actions. Urbanites are constantly arguing over prima facie good things. (Housing for the humans is good but it is bad!) They frequently make and consider counter-intuitive cases with appeals to indirect effects. That’s less common for people who live at lower densities. Republican politicians almost constantly emphasize—because their constituents are receptive to them—notions like “common sense”. A simple version of common sense often works pretty well in low density environments where the (directly perceptible) consequences of most actions are experienced by the people who voluntarily participate in them. People formed by lower densities have stronger priors to overcome before they concede the existence of invisible but urgent consequences to what seem like ordinary, and very valuable, activity. Given the stakes for America’s huge oil and gas industry, (at least) one of America’s two political parties was always liable to be climate reactionary, regardless of the evidence. Of the two parties, perhaps climate skepticism finds a more natural home among Republicans than Democrats not because rank-and-file Republicans are anti-science, but because their reasonably formed priors render the burden of evidence for “spooky action at a distance” higher than for density-addled Democrats.

It is easy for people like me (and most likely for people like you, dear reader, although I hope not all of you) to conclude that it is Republicans who are basically mistaken, afflicted with an externality optimism that may be understandable but is in fact unsupportable in the contemporary world. I think that’s true, but not quite the right lesson to draw. For while externality pessimism is more suited, descriptively, to the modern world than externality optimism, in a prescriptive sense there is perhaps no project more important than restoring or creating contexts within which externality optimism would be correct and adaptive.

Wilkinson writes, “There are no Republican cities.” An obvious retort by Republicans might be, “There are no well-governed cities.” Among larger cities, at least within the United States, I think the retort is broadly correct. You don’t have to endorse the slander against my remarkable native city by this moment’s unfortunate President to concede that the problem of effective governance remains pressing and unsolved in America, at the municipal level as much as any other. America’s most prosperous cities are far from immune. Governance is the world’s most pressing unsolved problem. We need new ideas and “petrie dishes” that enable creative experimentation and hopefully progress. We are, for now, just terrible. The scale and scope of diverse modern polities has outstripped our capacity to govern.

So, arguably one of the best approaches we have for now, is to try to reorganize our affairs so we need governance less. That’s a quite different claim than to argue for “small government” in the world as it is. As poorly governed as our cities currently are, it would be idiocy to argue for less government where in fact the reality of pervasive externalities demands extensive regulation and negotiation. But, to the limited degree that it is possible without making ethically abhorrent or materially intolerable trade-offs, encouraging ways of organizing ourselves that render externality optimism a less deluded intuition would mitigate some of the harms of our incapacity to govern.

The first-best solution, of course, would be to get better at governing, at every scale and level. If the problem of governance were solved, if we knew how to i) coordinate the provision of public goods at any scale, with ii) widespread legitimacy and minimal dispute over the distribution of benefits and obligations iii) across diverse constituencies while iv) upholding liberal values, the possibilities that would be unlocked for human flourishing are unfathomable. And though we may never fully achieve all that, governance is a practice, an institution, a social technology. It is susceptible to improvement. We can make progress.

But in the meantime, altering circumstances where we can, so we require governance less, so that the stakes of political conflict are lower, may be a helpful stopgap. That sounds like, and is, a very Republican kind of insight. But it’s also the basis for a lot of small-is-beautiful intuitions among lefties. And it’s the basis for these words, by John Maynard Keynes in 1933 (ht Tyler Cowen):

To begin with the question of peace. We are pacifist today with so much strength of conviction that, if the econornic internationalist could win this point, he would soon recapture our support. But it does not now seem obvious that a great concentration of national effort on the capture of foreign trade, that the penetration of a country’s economic structure by the resources and the influence of foreign capitalists, and that a close dependence of our own economic life on the fluctuating economic policies of foreign countries are safeguards and assurances of international peace. It is easier, in the light of experience and foresight, to argue quite the contrary. The protection of a country’s existing foreign interests, the capture of new markets, the progress of economic imperialism–these are a scarcely avoidable part of a scheme of things which aims at the maximum of international specialization and at the maximum geographical diffusion of capital wherever its seat of ownership. Advisable domestic policies might often be easier to compass, if the phenomenon known as “the flight of capital” could be ruled out. The divorce between ownership and the real responsibility of management is serious within a country, when, as a result of joint stock enterprise, ownership is broken up among innumerable individuals who buy their interest to-day and sell it to-morrow and lack altogether both knowledge and responsibility towards what they momentarily own. But when the same principle is applied internationally, it is, in times of stress, intolerable—I am irresponsible towards what I own and those who operate what I own are irresponsible towards me. There may be some financial calculation which shows it to be advantageous that my savings should be invested in whatever quarter of the habitable globe shows the greatest marginal efficiency of capital or the highest rate of interest. But experience is accumulating that remoteness between ownership and operation is an evil in the relations among men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation.

I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel—these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national. Yet, at the same time, those who seek to disembarrass a country of its entanglements should be very slow and wary. It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction.

Do read the whole thing. It is a remarkable essay.

We are left, I suppose, with externality pessimism of the intellect, externality optimism of the will. Until we get better at governing.

Update History:

  • 27-Apr-2019, 3:40 p.m. EEST: “Technology and the scale at which our economy and finance has become organized meansmean that we all live in a crowded city”; “…the retort is broadly truecorrect.”; “externality pessimism of the mindintellect, externality optimism of the will”; “But oneOne of my aims in this exercise…”; “TheThese catastrophes are indifferent”; “…once they step from the parking lot into their vehiclevehicles…”